Buying a property abroad is no doubt an exciting process, but it can also be incredibly nerve-wracking; not only do you need to ensure you find the right property and location for you, but there’s also the added pressure of sorting your finances, arranging a mortgage (if you need one), and a whole host of other things to consider before you sign that dotted line.
As Jelena Cvjetkovic, the Associate Director of Savills explains, “There’s a lot more to buying a second home in the sun than viewing a few likely properties and taking the plunge. Successful purchases require a great deal of research, several visits and a certain amount of soul searching. If you are looking for a home in the Mediterranean, for example, it is a good idea to start your search early in the year, and if possible make your first viewing trip during the winter. Many properties used as second homes will be empty then, therefore access is almost guaranteed.
“In spring and summer, suitable properties are more likely to be occupied by owners or rented out, making viewing arrangements more difficult. Also, if you like the property in winter, you are bound to love it in the spring or summer when gardens are in full bloom and swimming pools in action.”
However, so long as you do the right research, get as much advice as possible and do all the necessary checks before making a commitment, buying a property abroad doesn’t have to be a minefield!
Josh Shepard, Owner of The Lost Passport, relocated from Sydney to Bangkok and has spent the past five years travelling Asia. Having invested in Thailand’s property market, he offers the following advice when investing in property abroad: “Firstly, research the property developer. In Asia, some developers are known to cut corners, and it’s not uncommon to see a building sinking and cracking just two years after construction. Place your money with a well renown property developer for the long term.
“Secondly, find out the occupancy rates. Low occupancy means paid-up strata fees are not sufficient to maintain facilities and common areas, and this is also a big sign of a price decline.
“Thirdly, learn where new transport routes are planned. Public transport drives local population growth and results in a high growth in value. Buy just before a new train station is complete, and you’ll probably double your investment in 3 to 5 years.”
From your own financial matters, to the localities of buying a property in an unfamiliar country, here’s everything you need to consider before buying a property abroad…
Before you buy
Be aware of your ownership rights
The most important thing to do before buying a home abroad is to research your ownership rights and ensure you’re legally free to own a property in your desired location. For example, in some countries (such as Brazil), there are certain laws around owning a property as a foreigner.
Although foreigners are free to buy property in Brazil’s urban areas, there are restrictions around rural properties and a set of procedures that need to be followed before buying. As Iure Pontes Vieira, a Partner and Attorney-at-Law at Pontes Vieira explains, “First the buyer needs to acquire a Brazilian tax identification number. But before buying, you’ll need to take into account some restrictions linked to rural real estate. “
“If you’re a foreigner wanting to buy rural property within the Brazilian territory, you’ll need to be aware of some of the restrictions in place. It’s important to stress that you can only buy rural property in Brazil if you’re already a Brazilian resident.”
International Living also provides some useful information on property ownership restrictions abroad for a variety of locations.
Learn the necessary tax codes
Another important step to take before moving is taking the time to learn the necessary tax codes. If you’re a foreign national (for example, from the US) then this will be for here (in the UK), as well as in the country you’re buying a property in.
In terms of the UK, you need to be aware that you should declare any values made or lost from buying or selling a property abroad. In terms of the country you’re buying in, it’s important to know that some countries large sums for buying property; just think of it in terms of stamp duty. These charges can be both national and local taxes, so make sure you seek the help of a specialist adviser.
Craig Joslin, the Founder of The Australian Expat Investor, says: “When buying property abroad, buyers should consider the tax implications in both the country the land is located in, and the tax implications in their country of tax residence.”
“Buyers should first check whether there is a tax treaty (commonly referred to as a double taxation agreement) between the country the land is located and the country of their tax residence (usually the country they live in). The purpose of double taxation agreements is to avoid a person’s income being taxed both in the country of source and in their country of residence.”
“You should always engage a local tax adviser (as well as a tax professional in your own country) to fully understand the complete tax implications of buying property abroad.”
Alicia Young, owner of The Expat Expert, is an Australian who has bought a home in Chile. She advises: “Take time to get financial advice, as you’ll need to know your tax implications both there and at home. For example, I understand Chile gives foreigners three years’ grace period before taxing them on WWE (World Wide Earnings).
You should also consider who will property manage if you won’t be living there full time. In Chile, we were allowed to buy properties on a tourist visa, but foreigners can’t open bank accounts. We rely on friends to act as a portal to pay taxes and utilities. Therefore, I’d advise; research, demystify and ask open-ended questions!”
In terms of your personal finance, you should also always be prepared! Create a checklist of what you need to buy, and safeguard your funds in preparation. Areas you will need to think about include (but are not limited to) financial advisers, surveys, mortgage fees, international bank transfer fees, moving fees, storage, will making fees (if needed), translation fees, insurance, and the costs and implications of moving your pets abroad.
Arranging a mortgage (if you need one)
Do your homework beforehand!
It’s an obvious point to make, but mortgages are a little bit like the weather as they are ever changing, and it can be hard to keep up with them. Our advice? Do your research (which is likely to involve a lot of digging to find the right mortgage for you) or make things much simpler for yourself by enlisting the help of a financial advisor.
Put simply, it’s worth investing more during this point of the buying process; you should really try not to cut corners as you will only end up paying for it in the long run.
Stephen Brown, Managing Director of Overseas Mortgage Broker, says: “The top three things people need to consider (in my opinion) for an overseas mortgage are: the deposit required, how affordability is calculated, and that the system is likely to be different to where they currently live.”
“Some major misconceptions for buyers is that it will be a quick and easy process. As a result, buyers try to cut corners by not engaging professional help, trying to cut costs, and not making enough trips to the country. However, sellers try to cut corners by not getting their properties ready for sale from a legal perspective (e.g. illegal extensions).”
Adrian Huston of Huston & Co Tax Consultants also advises: “before getting an overseas mortgage, you need to be aware that your own tax-residency status will affect the lender. Many UK lenders will not lend to people who are a non-resident for tax purposes, even if they have a home and a family in the UK.
“You should also be aware of currency fluctuations. If your rent will be in the local currency, a mortgage in that currency may avid a lot of ups and downs with rates.”
Be in the know when it comes to paperwork
It’s so easy to do a quick skim through paperwork and just sign important documents in haste. In fact, this is often the case; especially when you’re under the impression that the majority of these types of documents will be made up of generic jargon that you don’t need to understand.
However, while many of us are guilty of this, please do not think you can get away with it when signing mortgage documents. Get a professional to talk you through it, and make sure you fully understand what you’re signing.
This may sound like an obvious and silly point to make, but it’s easy to get stung!
When buying a property abroad, it’s also vital to invest in a quality translator to ensure nothing is lost in translation. Simon Conn, an Overseas Property and Finance Specialist, explains: “The costs involved with buying a property overseas can soon stack up and some people might think they can cut costs by using a free translation service. However, misunderstandings in the contracts at the initial buying stage could end up costing people a lot more in the long term.”
“Although people might think it is safe to use a foreign language tutor, because they can understand both languages, realistically they will not have access to the experience or the knowledge that a larger professional company would. Of course, some might, but the majority will probably know very little about local laws or the formalities of purchasing a property.”
Legalities and paper work
Don’t forget the local laws
Buying a property in the UK is very different to buying one abroad. Because of this, you need to make sure you know the local laws inside out before making commitments.
Louise Reynolds Director of award-winning European property investment firm, Property Venture®, says ‘It might be stating the obvious, but some home buyers and owners don’t necessarily think through the fact that buying and renting laws are different in Continental Europe to the UK. So in some countries, the scope for renting a home out is more restricted than others, and tenants may have greater levels of protection. It pays to set up your purchasing contract or rental agreement correctly in the first place.’
The importance of being aware of local laws is also particularly true in regards to planning permissions if you’re hoping to carry out any major works to renovate your property.
Think about time frames; how long will it take from a legal perspective? Will there be any problems if the paperwork is delayed? If you are planning to undertake major works, then do they need to happen within a specific period of time (and will this have any further repercussions?). These are just a few of the questions that you need to ask yourself before buying.
It’s worth planning a basic timeline before you get into the nitty gritty; this ensures that you are fully prepared for a potentially lengthy process.
The professionals vs. independent advice
When buying a property abroad, make sure you have a strong team of professionals working with you. It goes without saying that this will make all the difference between having a nightmare of a journey, and a slightly smoother process. Or, at least from your side of the table.
It might also sound obvious, but you need to ensure that professionals working on your case have the highest standard of qualifications in their sector. They should be ‘the best of the best’, though within reason and your available budget!
When it comes to independent advice, you need to be careful about where you seek it from. Although recommendations from others are always welcome (and can be a good place to start if you’re unsure), professionals that come from the developer or property owner should typically be avoided, especially if there’s a language barrier. After all, they could provide biased advice without intending to.
By going with an independent professional, you can be safe in the knowledge that there won’t be any unspoken favouritism going on.
As with your paperwork, investing in an interpreter’s services will also be very important in this case.
The property in question
Check the outstanding debts
It’s essential that you undergo a series of checks prior to purchasing or signing for a property abroad. Firstly, you may not know or have heard of the owner or the developer of the property, which means you’ll know nothing about their history or their track record.
Carrying out checks regarding the deeds of the property will ensure that you will not be taking on any debts from the current owner. You’ll also need to ensure that the property has not been offered as an indemnity to clear anything from loans to utility bills. As you probably know already, this process will be costly enough without taking on additional charges.
Get the low down from the neighbours
We can’t stress the importance of this enough; get chatting to your potential new neighbours! Before you buy, you’ll want to get all the details of what to expect when the property is yours. Therefore, you should do a little digging and find out as much as you can.
Think about noise pollution, problem neighbours and the cleanliness of the area, as well as any other factors that you’d want to know before buying as these could potentially affect your decision-making process.
When talking to the neighbours, also don’t feel like you need to tell them you’re thinking about buying a property in the area. Even if it isn’t intentional, they could give you a masked view of what the area is like and gloss over less savoury details
Get everything in writing
If you’re going to take just one piece of advice from this article, then this should be it; whatever you do, get everything in writing. It’s vital that you have proof of all aspects when purchasing as you don’t want any additional costs or issues to arise further down the line.
Doing business through a telephone conversion is fine if it’s required, but face to face meetings should also happen to ensure all actions are confirmed in writing, all recipients have copies, and nothing can be greatly misunderstood before it’s too late.
Don’t get scammed out of your cash!
Never transfer money to someone within first doing your research or fall for the trick of asking to them provide funds through an external money transfer service! If they’re dealing with a serious seller, then they’ll happily accept a letter from your solicitor.
The information available to you on the internet is vast. However, it’s essential that you stick to advice from trusted sources. The Gov.UK website can provide you with guidance that can be trusted, and you can also call them for further information should you need it. Which? is also a good source for guides to buying property broad.
If you’re concerned about fraudulent activity, Action Fraud should also be your first port of call.